Bond Market – Monthly Analysis

CANDLES & TA:

The most important message from the 10Y yield is that the monthly candle signals proximity to a bottom. Whether rates make a new lower low in December or not, the odds of a bullish reversal are now above 50%. The 15D and weekly frames closed with bearish candles, pointing to lower rates at least in early December.

Overall, the very long-term outlook remains bullish, supported by the monthly and higher-timeframe trends and technicals. By the end of December, we will have plenty of long-term signals to guide the next moves.

The following key paragraphs are from the previous monthly analyses, and I keep them for a long-term reference:

From the April 2024 monthly: “The yield ended in April with strong bullish candles across multiple frames and long and very long term odds remain bullish. The monthly frame recorded a 50/200 MMA “golden” cross at the beginning of May. It did not happen for 72 years. After it was recorded last time in 1952, the rates rallied for 30 years and reached 15.82% in 1981.” The cross expanded wider in May and we have no reasons for considering a reversal in this department.

I’d like to remind that in 2023, US10Y recorded several very long term signals, such as 8/20 EMA crosses on the quarterly and semiannual frames, which are extremely rare. For example, the quarterly 8/20 EMA cross last time happened in 1955. Following the cross, there were 26 years of rate increases from 2.7% to 15.8%.

RATE of GROWTH
(initially discussed on February 9, 2023)

In 2023, I discussed certain events and compared them to similar occurrences in the 1950s, noting that everything seems to be happening faster in the bond market this time around. The pace is markedly different, and I continue to maintain this hypothesis.

Looking at the annual candles, it’s evident that the current sets and the rate of growth are far more agile compared to the mid-20th century.

From 1940 to 1950, it took 18 years for the 10-year yield to climb from the bottom to 4.5%. This time, that same rate was achieved in just 4 years—a pace 4.5 times faster. If this trajectory continues, we could witness a strong acceleration in the coming years, potentially completing the current cycle by 2029-2030. It’s certainly something to keep in mind.

ELLIOTT WAVES

Very Long Term
No change, refreshed the chart.

On a very large scale, the US 10-year yield (US10Y) completed its first impulse wave from the 2020 lows. Wave ii may get extended for a few quarters or even years, horizontally or slightly downward.

Notably, this chart has remained unchanged since December 2022, reinforcing the long-term outlook.

Annual 8-20 EMA Bullish Cross

At the beginning of 2025, the US10Y attempted an 8/20 EMA cross on the annual frame, but it was pulled back during the year. Even if the cross does not complete this year, the slopes of the moving averages make it effectively inevitable within the next few years. A confirmed cross — whether this year or next — would signal the start of a long bull market in rates, potentially similar to the one observed from 1950 to 1980.

Long Term

With both scenarios on the table, the very long term outlook remains strongly bullish. A move below the red horizontal line will invalidate the red count and make the blue primary.

Mid Term

So far, the mid-term chart is playing out well. I’d like to see a new low in 2025 — below April’s low but above the 2024 low. In that case, I’d treat the current wave as an Ending Diagonal c of (b), likely followed by an even stronger wave (c) of B.

Spread 10Y-2Y
(no change, refreshed chart)

The 10Y–2Y spread remains in a long-term bullish trend, supporting a continued healthy environment for the economy. The monthly frame failed to develop a downward trend and closed with a consolidation candle. The probability of a move higher is greater.

Canadian 5-year Yield

The Canadian 5-year yield avoided a monthly Bullish Engulfing, closing instead with a neutral candle that requires confirmation in either direction. At this point, I would not bet on the BoC move on December 10.

SUMMARY

The 10Y yield closed November with short- and mid-term bearish signals, while the monthly frame remained bullish. The broader set of long-term indicators is still constructive, and the key question now is whether this stance will be reconfirmed at the annual close. Although the probability of a move lower in early December is elevated, a fully bearish monthly outcome appears unlikely.

The 10–2Y spread continues to look healthy. Both the candle structure and the accompanying technical readings point to higher odds of further widening, which in turn supports ongoing economic activity.

Overall, the very long-term outlook remains bullish, backed by the monthly and higher-timeframe trends and technicals. Unless rates decline sharply in December, the monthly and annual closures remain on track to finish bullish. These will be interesting dynamics to monitor.

From the previous analyses:

In 2024 and 2023, US10Y recorded several strong technical events that hadn’t occurred for decades, making it very difficult to reverse these trends. This suggests that higher rates are almost guaranteed in the coming years.

US10Y is also close to recording another significant event—a cross above the 100 annual moving average (MA) resistance line. This has not yet happened, and we are closely monitoring it, though it will require a lot of patience.

I would like to reiterate (as discussed earlier) that a prolonged period of higher rates is not necessarily damaging for markets. If we look at the period from the 1950s to the 1980s, a time of increasing rates, the markets grew on average 6-7% per year. We might see a similar trend in the coming years.

Happy Trading!